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Experts call for easing monetary policy

By Chen Jia  (China Daily)

15:01, September 05, 2012

The depressing picture painted by China's recent economic data has encouraged some economists to call for the use of monetary levers to increase bank credit and stabilize economic growth.

Some policy watchers expect a cut in the commercial banks' reserve requirement ratio by at least 50 basis points, as well as a reduction in benchmark interest rates of 0.25 percentage points by the end of this month.

Other economists close to the government suggested that monetary policy easing could be more selective, by lowering the lending rate, promoting market-based interest rate reform and injecting liquidity into the capital market.

In the second half of this year, China is expected to enter into a period of consecutive RRR cuts, said Ba Shusong, a senior economist with the Development Research Center of the State Council.

"It is likely that in the next one or two years the central bank will need to continually reduce the RRR to boost market liquidity, as yuan holdings for foreign exchange purchases may decrease thanks to gloomy exports amid weakening global economic growth," Ba said.

China started a cycle of RRR cuts last December, which has released about 400 billion yuan ($63 billion) into the capital market, after three years of monetary tightening.


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